the uniform law on international sale of goods: a

THE UNIFORM LAW ON INTERNATIONAL SALE OFGOODS: A CONSTRUCTIVE CRITIQUE

HAROLD J. BERmAN*

INTRODUCTION

In no other major branch of law is there more uniformity among the principallegal systems of the world than in the law of international sales. Contract law re-lating to documentary transactions, the law of carriage of goods by sea, rail, and air,the law of marine insurance, and the law of bank credits and acceptances, are basicallythe same in their general character-so far as international sales are concerned-in theso-called "common law" and "civil law" systems as well as in the legal systems ofthe centrally planned economies of the Soviet Union, Eastern Europe, and China.

The reasons for this are not hard to find. On the one hand, the merchants,carriers, underwriters, and bankers of the world who engage in international salestransactions have had centuries of experience in establishing common practices andcommon norms. Moreover, they continually renew their common traditionsthrough negotiation of contracts, through arbitration of disputes, and through theestablishment of rules by trade associations. On the other hand, lawyers andlawmakers of many countries have also responded, over the centuries, to the needfor uniformity in the law of international sales, and have helped to develop suchuniversal legal institutions as the c.i.f. contract, the bill of lading, the marine insurancepolicy and certificate, the bill of exchange and letter of credit.

Commercial codes of France, Germany, Italy, the Scandinavian countries, theUnited States, and other countries, and general commercial statutes like the BritishSale of Goods Act, are themselves based partly upon the international "law mer-chant," and national courts have received international commercial law through theapplication of such codes and statutes as well as through interpretation of interna-tional sales contracts. Uniformity has also been bolstered by international con-ventions such as the Brussels Convention on Carriage of Goods by Sea and others, aswell as by rules adopted at international conferences, such as the 1932 Warsaw-Oxford Rules for CIF Contracts, and by comprehensive contract conditions workedout for various types of exports by the United Nations Economic Commission forEurope. Finally, state trading agencies of all countries, including countries ofcentrally planned economy, have to a large extent adapted themselves to traditionalinternational commercial-law institutions; indeed, even in trade with each other, thecountries of centrally planned economy employ contract techniques and contract

* Professor of Law, Harvard University. The author is grateful to Joseph L. Gibson, LL.B., HarvardUniversity, 1965, for valuable assistance in the preparation of this article.

A CRITICAL COMMENT 355

law that closely resemble-in their main outlines-the techniques and law of interna-

tional trade in Western Europe, England, and the Americas.'Nevertheless, despite the high degree of universality of basic concepts in the law

of international trade, there remain many differences in their detailed application;

and this multiplicity of minor differences often presents serious obstacles both to

the negotiation of international sales contracts and to the resolution of conflicts arising

out of such contracts. Indeed, even slight differences in the wording of similar rulesmay give rise to difficulties in reaching agreement in advance and in settling disputes

thereafter. In addition, minor differences in the general contract law of different

countries regarding such matters as formation of contracts, breach, damages, andthe like, sometimes lead to substantially diverse results in similar cases. The need,

therefore, for further unification of the law of international sales continues to be

a pressing one.

I

THm SIGNIFICANCE OF "MINOR" DIFFERENCES

These elementary truths are the necessary foundation for an evaluation of the1964 Hague Convention relating to a Uniform Law on the International Sale of

Goods (hereinafter referred to as the ULIS). It must be understood, first, that the

need for such a convention arises not primarily from the existence of major con-

ceptual differences among legal systems (for such major conceptual differences in

this area of the law are few in number), but rather from the existence of a great

many minor differences; and second, that any resolution of the minor differencesmust preserve and clarify the common practices and norms that have been de-veloped-and are continually being developed-by the international trading com-

munity, and that are reflected (not always uniformly) in national legal systems.The framers of the ULIS have, unfortunately, taken a different approach. They

have sought to eliminate from the law of international sales the application ofnational law, including the large body of international commercial law and custom

contained in national law, and to substitute, as a self-sufficient code, a relatively

few general rules.2 These rules are conceived as a subsidiary law, to be applied

by national courts and arbitral tribunals in the light of particular contracts and in' Cf. Berman, The Unification of Contract Clauses in Trade Between Member Countries of the

Council for Mutual Economic Aid, 7 INT'L & CoMp. L.Q. 659 (1958), containing a translation of thestandard contract conditions adopted by the CMEA in 1958.

SULIS art. 2, discussed infra, excludes the application of rules of private international law unlessthe contract provides otherwise. Cf. Rabel, The Hague Conference on the Unification of Sales Law, iAm. J. Comp. L. 58, 6o (1952): "Within its corners, however, the text must be self-sufficient. Wherea case is not expressly covered the text is not to be supplemented by the national laws-which would atonce destroy unity-but to be construed according to the principles consonant with its spirit."

The exclusion of private international law is convincingly criticized from the point of view of conflictof laws by Nadelmann, The Uniform Law on the International Sale of Goods: A Conflict of Laws Im-broglio, 74 Y-F L.J. 449 (x965). The present article approaches the question from the point of viewprimarily of the law of sales. Cf. Nadelmann, at 461.

356 LAw AND CONTEMPORARY PROBLEMS

the light of usageY The pressing practical problems of a more specific character are,for the most part, ignored. A businessman or lawyer who studies the ULIS foranswers to the questions that cause special difficulty in the drafting of internationalsales contracts, or a court that looks to it for guidance in resolving disputed issuesof interpretation of such contracts, or of interpretation of law or usage, will bedisappointed.

It would be ungrateful to the many distinguished European jurists who haveworked for decades to produce the ULIS not to recognize that what it sets out to do, itdoes very well. It succeeds admirably in harmonizing, in a generally acceptable way,basic principles of the law of international sales reflected in various legal systems. Rulesconcerning obligations of seller and buyer, breach, damages, excuse, the passing ofthe risk, and a variety of similar matters, are presented clearly and intelligently.Although one may quarrel with many of the formulations, especially in Englishtranslation,4 most of the provisions of the ULIS relating to the obligations of sellerand buyer could be adopted by most of the major trading nations of the worldwithout too much difficulty-and indeed, without substantially changing their exist-ing law. By the same token, however, the ULIS does not eliminate those nationaldiversities that are most oppressive to international trade, for those diversities, as wehave said, are diversities not of basic principle but of specific application.

A few examples may help to make this clear:(a) There is considerable diversity among different legal systems concerning the

documents to be tendered by the seller in order to satisfy the requirements of aci.f. contract, absent an express contractual indication. May a delivery order betendered instead of a bill of lading?5 May a marine insurance certificate be tendered

' ULIS art. 3, discussed infra, permits the parties to exclude the ULIS in whole or in part. Article 9provides that the parties, unless they otherwise agree, "shall be bound by usage which reasonable personsin the same situation as the parties usually consider to be applicable to their contract." But unfortunately,the word "usage"-whose meaning is by no means uniform throughout the world-is itself not definedin the UUIS.

' The English translation contains some terms that are not familiar to English and American lawyersand some familiar terms that mean something different in the French original. Also there are someplain translation errors. The most serious translation problem is the rendering of the French deliverance,which means something other than "delivery" as understood in England and America; this is discussedbelow. An example of awkwardness may be found in section II (article 74), which is entitled Exonera-tion in French and "Exemptions" in English; a better translation would be "Excuse." The last phrase ofarticle 74(l) is improperly translated: ". . . regard shall be had to what reasonable persons in thesame situation would have intended"--instead of ". . . regard shall be had to what reasonable personsin the same situation normally intend." The correct translation suggests a more objective test. Thereare many other examples of linguistic difficulties that suggest that the English version requires a ratherthorough revision.

5 In a case decided by the House of Lords involving an Argentine seller and a Belgian buyer, acontract labelled "c.i.f" expressly permitted the seller to tender to the buyer a delivery order coveringa portion of a shipment of rye sold afloat. The House of Lords held that the delivery order had nocommercial value and that the use of it, instead of a bill of lading, transformed the contract into adestination contract. Comptoir d'Achat et de Vente du Boerenbond Belge, S.A. v. Luis de Ridder, Limitada(The Julia), [1949] 1 All E.R. 269 (H.L.). The decision seemed to meet with the approval of Belgianjurists. Cf. de Juglart & Chasseriaux, Le delivery order. Ses diverses formes, 3 REvuE TrmMaSrIEnzMEDn DRorr CoMM EcwAL 124 (1950), Jacques van Doosselacre, Observations, 93 JURIsPRUDENtCE DU PoRTD'ANvERS 316 (r949). It is at least possible, however, that a different result would be reached in the


instead of a policy?' Does the duty to provide insurance include the duty toprovide war risk insurance?7 The ULIS simply avoids such questions. It does notmention bills of lading, marine insurance certificates or policies, or other particulartypes of documents, and it does not meniton ci.f. contracts.

(b) There is also considerable diversity among different legal systems concerningthe effect of the denial or revocation of an export (or an import) license by thegovernment of the exporter (or importer) upon the seller's and buyer's obligations.Absent an express reference in the contract, which party is to bear the risk of sucha contingency?' The ULIS contains an excellent general definition of excuse fornonperformance (article 74)-one which can probably be harmonized with existingdoctrines of impossibility or frustration in most countries-but it does not say any-thing about denial or revocation of export or import licenses or about governmentalintervention of any other kind or, indeed, about any specific types of contingenciesthat will or will not excuse unless the parties expressly provide otherwise.

(c) The ULIS expressly provides for the seller's right of stoppage in transit onlyin the event that the economic situation of the buyer has become difficult (article 73).Probably the right of stoppage may be considered to exist, as a matter of internationaltrade usage, in other circumstances as well (e.g., in case of the buyer's breach notcaused by economic difficulties). Nevertheless, usage concerning the scope of theright of stoppage in transit is by no means clear. For example, when goods aretransshipped difficult questions may arise concerning whether a carrier or warehouseis the agent of the seller or of the buyer, and whether, therefore, the goods remainin transit or have, from the seller's point of view, come to rest? Also it is not certainwhat rights and duties the bailee may have, when confronted with an order to stopin transit-whether, for example, he must obey a notification to stop or may insiston surrender of a negotiable document of tide, and whose notification he must obeyin the event that the goods are shipped by a straight bill.10

The ULIS contains almost nothing on agency or on rights of bona fide purchasersor of bailees; these subjects have been excluded on the ground that the ULIS should

United States under the Uniform Commercial Code, which includes delivery orders among documentsof tide. Cf. UCC x-2O1.

'English and American courts are divided on this question. Cf. Diamond Alkali Export Corporationv. Fl. Bourgeois, [1921] 3 K.B. 443, and Kunglig jarnvagsstyrelsen v. Dexter & Carpenter, Inc., 299 Fed.991 (S.D.N.Y. 1924).

'The Uniform Commercial Code provides that the c.i.f. seller must take out customary war riskinsurance for the benefit of the buyer. This is said to have changed the common law on this point.UCC 2-320(2)(c), and comment 7.

8 Cf. Berman, Excuse for Nonperformance in the Light of Contract Practices in International Trade,63 COLUm. L. REv. 1413, 1436 n.49 (1963); id., Force Maieure and the Denial of an Export Licenseunder Soviet Law, 73 HAv. L. REv. 1128 (ig6o), and authorities there cited.

' Under American law, generally speaking, the seller may stop shipment if the bailee holds the goodsfor the benefit of the seller but not if he holds them for the benefit of the buyer. Conflicting judicialdecisions were resolved in the Uniform Commercial Code by the provision that the right of stoppageceases to exist if a bailee (including a warehouseman) acknowledges to the buyer that the goods are heldfor him or if a negotiable document of title is transferred to the buyer. UCC 2-705(2).

'0 Cf. UCC 2-705(3).

LAw AND CONTEMPORARY PROBLEMS

deal only with buyer and seller and not with third parties. But even assuming thatthis were sound as a general matter, it is surely unsound when the rights of seller andbuyer vis-a-vis each other depend entirely on their rights vis-a'-vis third parties-asin the case of stoppages in transit, and, indeed, in a great many other even moreimportant cases.

A great many of the gaps that exist in the ULIS, though by no means all of them,derive from the decisions of its authors to exclude from consideration the varioustypes of documentary sales. Two articles (50 and 51) are devoted to documents, but

they say almost nothing except that where documents are called for they must betendered. Documents are also referred to in various other articles, but nowhere isthere any definition of them and and nowhere is there any reference to the obligationsof seller and buyer in c.i.f., f.o.b., and other types of documentary sales. Thesesubjects were considered to be too complex to be covered in a Uniform Law onInternational Sale of Goods." The result is a law that is too simple to be helpful,for the typical international sale of goods is the documentary sale, and from thedocumentary sale stems a very large part of international sales law.

Even apart from the omission of documentary sales, the ULIS for the most partdoes not attempt to answer specific questions of the application of its general rules.It does not, for the most part, define its terms. It does not, for the most part, attemptto state the qualifications and exceptions to its rules. These are not, of course, over-sights, but matters of conscious policy concerning the technique of the law. One ofthe principal supporters of the ULIS, Andre Tunc, has justified its technique as beingin the Continental style of legislation and has asked that "Anglo-American" juristsaccept it as such.'2 One might quarrel with this on theoretical grounds: the ULISmay be in the style of the French Code civil, but it is hardly in the style of theGerman Handelsgesetzbuch or, indeed, of the French Code de commerceY It doesnot reflect the concern for specificity and certainty that is characteristic of commerciallegislation, as distinct from the general law of contracts, in Europe as well as else-

"The 1951 Rome Draft of the ULIS contained some provisions on c.i.f., f.o.b., and other types ofso-called "maritime" sales (in fact they are used quite commonly in international trade for overland aswell as overseas transactions). These were omitted from the 1956 and 1964 versions as being "inadequateto regulate a subject matter as complex as the great maritime sales." REPORT OF THr ComslsioN, SoIctAL

CoatMIssioN APPOINTED By THE HAGUE CONFERENCE ON THE SALE OF GOODS 33 (The Hague, 1963)." Tunc, Les Conventions de la Haye du zer ]hillet 1964 Portant Loi Unilorme str la Vente Inter-

nationale d'Objets Mobiliers Corporels, :6 REVUE INTERIATIONALE DE DRoIT COMPAR 547, 554 (1964):"II est simplement permis de penser que les pratiques commerciales de l'Europe, ses conceptions ct scsinstitutions juridiques, son style lMgislatif meme, ont aussi leur valeur, ct que ce serait une perte pour uneloi uniforme de porte plus universelle que celle de La Haye de n~gliger ces pratiques, ces conceptionset ce style ....

"The I964 edition of the Handelsgesetzbach, including supplementary legislation, runs to 1oo5 pagesof small print, plus appendices and index. In addition to the law of maritime trade and carriage ofgoods, it also covers bills of exchange, company law and rules of competition. The 1959 Dallozedition of the Code de Commerce, with supplementary legislation and annotations, runs to 883 pages ofeven smaller print. It also covers most aspects of business law. Both of these codes combine generalrules with detailed qualifications and exceptions; both are intended not only to guide courts in theresolution of disputes but also to guide merchants in making specific, detailed contractual arrangements.

A CraricA CoMMENT 359

where. Moreover, even if it were in the "civil law" tradition, as against the "commonlaw" tradition, that surely would be a matter of some concern, since the UnitedStates alone conducts more than one-seventh, and together with the United Kingdom,Canada, Australia, and New Zealand more than one-fourth, of the world's trade.Would it not therefore be preferable to combine the two legal traditions-especiallyin the field of international trade, where both have already yielded much to thetranscending pressures of international practices and norms?

But the rivalry of legal traditions is a trivial matter compared to the basic ques-tion of whether a codification of more or less universally accepted general principles,such as are contained in the ULIS, will (a) aid merchants who are engaged ininternational trade to reach agreements, and (b) aid in the uniform settlement ofdisputes arising out of such agreements-either by the parties themselves or bycourts and arbitral tribunals.

II

THE AUTONOMY OF THE PARTIES

Assuming that the ULIS is too general to be very helpful, is it harmful? Toanswer that question we must consider (i) the power of the parties to a contractto exclude the application of the ULIS, (2) their power to supplement its generalrules by specific contractual clauses, and (3) the power of the courts to supplementthe ULIS by drawing upon other sources of law.

A. Choice of Law by the Parties

Article 2 of the ULIS excludes the application of rules of private internationallaw except in a few special instances.14 Thus with minor exceptions, an internationalcontract of sale is to be governed by no law except the ioi articles of the ULIS, plusthe terms of the contract itself. However, article 3 provides that the contract may,if the parties so choose, exclude the ULIS "either entirely or partially," and that "suchexclusion may be express or implied." Thus the parties may write their own con-flicts rules, or may choose an applicable law, or may exclude particular provisionsof the ULIS. Unless, however, they do so expressly, difficult questions will un-doubtedly arise concerning whether or not they intended the ULIS, or a particulararticle or articles thereof, to be applicable. The generality of the provisions of theULIS will make it almost impossible to know whether a contractual clause thatcontradicts an article of the ULIS in some particular respect is meant to exclude thearticle entirely or only to make a single exception to it.

It should also be stressed that in many circumstances it will be very difficult, as a1' Article 16 leaves the question of entering or enforcing a judgment of specific performance open to

determination by national law. Article 38 states that methods of examination (inspection) of goods shallbe governed, in the absence of agreement of the parties, by the law or usage of the place where, theexamination is to be effected. Article 89 states that in case of fraud, "damages shall be determined byrules applicable in respect of contracts of sale not governed by the present Law."

36o LAw AND CONTEMPORARY PROBLEMS

practical matter, for a party to exclude the ULIS, whether in whole or in part andwhether by express provision or by implication. If either the exporter or the im-porter is benefited by the ULIS, he will resist the choice of another law or of acontradictory contract clause, and he will have behind him the prestige of an inter-national convention. Even without the ULIS it is often very difficult for partiesto international sales contracts to agree on an applicable law, or, indeed, on a departurefrom a standard legal norm even though it is dispositive rather than mandatory.In many places in the world it is considered a matter of national pride not to acceptthe application of a foreign law, especially when the party that is asked to acceptit is a state agency. And it sometimes happens that while the lawyers for the ex-porter and the importer are struggling over the question of a choice-of-law clause,their principals, being in haste and not anticipating difficulties, will sign thecontract.

B. Ad Hoc Contractual Rules

Since, however, the purpose of the ULIS is to be applied, not excluded, the morepertinent question is whether its excessive generality may be redeemed by specificcontractual provisions viewed in the context of international trade usage. This is,in fact, the major premise upon which the technique of the ULIS is based-that thedetailed obligations of the parties can be, and should be, regulated by the contractitself, interpreted in the light of usage, with legal rules playing a "subsidiary" role.

One suspects that this premise derives from the study of contracts after theyhave been drafted rather than from the experience of negotiating and drafting them.It is a matter of common commercial experience that international sales contractsare generally drafted against a body of law, and that the less specific the law, themore detailed the contract must be. A New York exporter of textiles, for example,may use a contract containing only a half-dozen "general conditions," so long as oneof those conditions is that the contract shall be governed by New York law. Thatis because the Uniform Commercial Code, adopted in New York, taken togetherwith New York judicial decisions, contains the answers to most of the specificquestions about which the exporter is concerned. If, on the other hand, the law ofhis French buyer is to be applicable, the exporter would want to retain the servicesof a lawyer who knows the answers given by French law to the specific questionsabout which he is concerned, and he would want to draft the contract in the lightof those answers. If the exporter and importer cannot agree on a choice-of-lawclause, they would normally assume that either New York law or French lawwould probably be applicable, under the general rules of private internationallaw, and would negotiate the terms with that in mind.

If, however, neither New York law nor French law is applicable, but insteadthe contract is to be governed solely by the ioi articles of the ULIS and by usage,the parties would need to insert into their contract specific clauses restating, in effect,


those rules of the law of international trade that are not contained in the ULIS andare not clearly defined by usage. They could not, without considerable uncertainty,simply use the terms "c.i.f.,.... marine insurance certificate," or other standard trade

terms, without defining them; they could, of course, incorporate by reference defini-tions developed by trade associations (especially, the American Foreign TradeDefinitions and the Incoterms of the International Chamber of Commerce), butthese by no means answer all questions. The parties would also need to include

their own rules on assignment of contract rights, insurable interest, rights of bonafide purchasers, and a host of other critical matters entirely omitted from theULIS. Presumably such matters are to be governed by national law, but they are so

closely related to the matters governed by the ULIS that often it would be verydifficult indeed to separate the two.

Even with respect to matters not omitted but covered by general rules in theULIS, the parties would want to specify in their contracts many of the detailedapplications of those rules. This alone would require a very great expansion

of the simple contract forms now used in many trades. It would be desirableto include in every contract all sorts of provisions now dealt'with (though notuniformly) by national laws-for example, that the buyer's expenses of inspection

must be reimbursed by the seller in the event that the goods prove to be non-conforming;l' that the ULIS requirements of notification in various articles aresatisfied if notice is dispatched (or alternatively, only if notice is received);16 thatwhere the seller manufactures goods to the buyer's specifications the buyer shall in-demnify the seller against any losses due to patent infringements;11 that the buyer'sobligation to pay is discharged if payment is made in a currency other than thatprovided in the contract where such alternative payment is required by a govern-

mental regulation unless such regulation is discriminatory or oppressive; and dozensof other clauses of like scope. Matters of expenses of inspection, notice, damages,payment, and so on, are, to be sure, dealt with generally in the ULIS, but not in thedetailed manner in which they are covered in national legislation and judicial de-cisions, and therefore not in a manner to satisfy the overriding need for certainty insales transactions between citizens of different countries.

At the very least, then, the adoption of the ULIS would require a very greatreadjustment in the contract practices of many enterprises engaged in internationaltrade. In many trade associations one might expect to see the emergence of longform-contracts, with scores of clauses, along the lines of the General Conditionsworked out for various trades by the Economic Commission for Europe; the ECEcontracts, too, like the ULIS, were premised on the effort to exclude the application

Cf. UCO 2-513(2).16 Cf. ULIS articles 19, 30, 43, and others, which require parties to "send notice," "declare," "inform,"

but do not indicate the consequences of failure to receive the message.'7 Cf. UCC 2-312(3) and comment 3." Cf. UCC 2.-614(2).


of rules of private international law. Without the auspices of an internationalagency of the United Nations, such detailed form-contracts could become veryoppressive; and trade associations themselves would be strongly opposed to theabandonment of the short contracts that now predominate in many types of tradeand that are easily understood by merchants.

Where, however, exporters and importers do not use form-contracts developedby trade associations-and such use is much less common in the United Statesthan in Europe-the difficulties would be even greater, for their foreign customerswould be reluctant to accept a set of General Conditions that looked like a restate-ment of the Uniform Commercial Code or the German Handelsgesetzbuch. Inaddition, many exporters and importers would be reluctant to incur the 'legalexpenses that would necessarily be involved in drafting and negotiating suchcontracts.

C. Standards for Adjudication and Arbitration

Even if the parties could succeed in agreeing upon contract clauses that coverthe main questions of international sales law that are neither included in the ULISnor clearly defined by usage, their troubles would not be over. For if a disputeshould arise concerning the interpretation of the agreed-upon clauses they-or acourt or arbitral tribunal-would face the problem of finding a basis for such inter-pretation outside of any existing national legal system.

In an effort to meet this problem, article 17 of the ULIS provides: "Questionsconcerning matters governed by the present Law which are not expressly settled byit shall be governed in conformity with the general principles on which the presentLaw is based." Since no "general principles on which the present Law is based" arestated, one may only guess that article 17 is an injunction to observe the spiritof reasonableness and good faith that pervades the ULIS as a whole. However,reasonableness and good faith are often an inadequate guide to the resolution ofclose questions of interpretation, especially in disputes between citizens of differentcountries. Moreover, article 17 seems to forbid a court to look to its own or anyother national law in construing contract clauses that fall outside the express languageof the ULIS and are not clearly defined by usage, provided that they concern mattersthat are governed by the ULIS, albeit in the most general terms. However, neitherthis nor any other proposition concerning the meaning of article 17 can be assertedwith conviction.

Thus, if the parties were to include in their contract any or all the provisions onsales law that are now contained in the Uniform Commercial Code-for example,concerning matters that are only very generally treated in the ULIS, and on whichusage is unclear or not uniform-there would still be missing the American case-lawand legal commentaries that interpret those provisions. Yet contracts of such com-plexity could scarcely be understood if taken out of the context of an articulated


legal system. The same would be true, of course, if rules of German or Frenchstatutory and decisional law were written into the contract and a court or arbitraltribunal were required to interpret such rules without reference to German or Frenchlaw as a whole.

III

THE ALLOCATION OF RIsKs

Perhaps the weakest part of the ULIS, next to its exclusion of the rules of privateinternational law, is its section on "risk." This section, placed at the end of the text,contains only six articles, each very general in character:

(r) Article 96 states that where the risk has passed to the buyer he shall paythe price notwithstanding the loss or deterioration of the goods.

(2) Article 97 states that the risk shall pass to the buyer upon delivery of thegoods. (Under article ig, handing over conforming goods to the carrier fortransmission to the buyer constitutes delivery when no other place of delivery hasbeen agreed upon.)

(3) Article 98 deals with the passage of the risk when delivery is postponedowing to the breach of an obligation of the buyer.

(4) Article 99 states that where there is a sale of goods afloat, the risk shall beborne by the buyer as from the time they are handed over to the carrier, unless theseller, at the time of the conclusion of the contract, knew or ought to have knownthat they had been lost or had deteriorated.

(5) Article xoo states that in the case of goods that were not appropriated to thecontract when handed over to the carrier, the risk remains with the seller untilnotice of the consignment is sent to the buyer, if the seller knew or ought to haveknown that the goods had been lost or had deteriorated after they were handed tothe carrier.

(6) Article iox states: "The passing of the risk is not necessarily determined bythe provisions of the contract concerning expenses."

Commercial lawyers will rejoice that the ULIS does not make the obligationto pay the price depend upon the transfer of property in the goods. In this theULIS reflects the modern statutory law or judicial practice of most countries. Themodern view, which separates passage of risk from passage of title, is a reactionagainst what Karl Llewellyn used to call "lump-concept thinking," as well as againstthe particular "lump-concept" of property. No single idea or formula can resolvethe very complex and diverse kinds of transactions that make up international sales.Especially the elusive concept of "property," with its different significance for credi-tors, taxing authorities, insurance companies, bailees, financing agencies, as well asbuyers and sellers, and with its different interpretations in different countries, must

LAw AND CONTEMPORARY PROBLEMS

yield to more specific and more realistic tests of commercial understanding withrespect to risks of loss or damage.

By the same token, however, one must beware of attaching too much affectionto the lump-concepts of "delivery" and "risk." There are deliveries and deliveries;and there are risks and risks. This does not mean that doctrines cannot be developedto encompass the variations; it only means that the doctrines must indeed encompassthem, and not force them into a single mold.

John Honnold has carefully analyzed the concept of delivery (delivrance) asdeveloped in the ULIS, and has shown how it differs from the concept of "handingover the goods"--and hence from the American concept of delivery.'0 If theULIS is ratified by a sufficient number of states, American international lawyersand traders will have to grasp the elements of the subtle concept of deliorance, withits mixture of fact and law. In the opinion of the writer, it is a concept that hasmuch to commend it; in any event, it is one of the few basic terms that are definedin the ULIS and its various connotations are made clear from the various contextsin which it is used.

The concept of "risk," on the other hand, is not defined. Judging from article 96,it refers only to the buyer's obligation to pay the price notwithstanding the loss ordeterioration of the goods. It is apparently the German Preisgefahr, or "price-risk,"although in French it it used in the plural (les risques). However, the word "risk"in "price-risk," at least as used in the ULIS, does not seem to have the meaningof "danger" (Gefahr) but only the meaning of obligation. Indeed, the word"risk" could apparently be eliminated from the ULIS without affecting the meaningof the law: instead of saying that the risk passes upon delivery (article 97) andthat when the risk passes the buyer shall pay the price (article 96), one could simplysay that upon delivery the buyer shall pay the price. Similarly in other articlesof the ULIS that refer to "the time when the risk passes" (e.g., article 35), thephrase "the time of delivery" could be substituted.

In short, the factual content of the term "risk" as used in other contexts outsidethe ULIS-e.g., the risk that the carrier will misdeliver the goods, the risk that thegoods are not adequately insured, the risk that they will be diverted by act of agovernment, and so on-is missing. Perhaps some such factual content is impliedin the qualification attached to the price-obligation: "notwithstanding the loss ordeterioration of the goods." This seems to make "risk" in the ULIS comparable to"risk of loss or damage." On the other hand, it is uncertain, under article 96, thatthe buyer must assume all risks or loss or damage; he might be obligated to pay theprice and nevertheless retain a right of action against the seller for damage to thegoods.

Apart from ambiguities arising from the failure to define risk, there are additional19 Honnold, A Uniform Law for International Sales, 107 U. PA. L. REv. 209, 317 et seq. (x958).

A CRITICAL CoMMENT

difficulties in the proposition that risk follows delivery (delivrance) and price-obligation follows risk. Three examples may help to illustrate these difficulties. Allthree involve, on their face, "shipment" contracts, in which the seller agrees todeliver goods by handing them over to a carrier for transmission to the buyer, andthe buyer agrees to pay the price upon delivery notwithstanding the loss or deteriora-tion of the goods. In the first example, the seller (a manufacturer-exporter) isexcused from liability for nonperformance because of the accidental destruction ofthe manufactured goods prior to delivery, but the buyer is nevertheless required bythe contract to pay the price.20 In the second example, the contract provides thatthe seller (a broker-exporter) will be responsible for the deterioration (e.g., shrink-age) of the goods after delivery-in other words, that the buyer may deduct fromthe price the loss in value due to the deterioration in transit.21 In the third example,the buyer is not liable for the price at all--even though conforming goods weredelivered by being handed over to the carrier for transmission to him-because theseller transferred to him (as provided in the contract) a delivery order, not signedby the carrier, instead of a bill of lading. 2

From the point of view of the ULIS, these examples, all of which are not un-common, simply represent contractual deviations from the "dispositive" provisions ofarticles 96-ioi, i .e, provisions that are effective only if the parties do not stipulateto the contrary. The ULIS does not say that the buyer may not ever be liable to paythe price prior to delivery, or that the seller may not ever be liable for deterioration ofthe goods after delivery, or that the buyer may not ever be excused from liability to paythe price after delivery. It only insists that these deviations from the norm must beprovided for by contract. Unfortunately, however, the problem is not so easilyresolved. Not only do difficulties arise in drafting appropriate clauses varying therisks, in view of the absence of specific legal definitions and standards, but alsosuch clauses cast doubt upon the price-obligation itself.

If, for example, clauses are inserted in the contract guaranteeing the weightof the goods on arrival, or providing that freight is payable only on arrival, or thatthe buyer shall have the right to inspect the goods after arrival, or that the dutyto insure is the buyer's responsibility, or that the seller will tender a delivery orderrather than a bill of lading-then the contract may or may not be turned from ashipment contract into a destination contract, and the buyer may or may not beobligated to pay the price in the event that the goods are lost. The ULIS only dealswith this matter in a single phrase: delivery is effected by handing over the goods

20 Cf. U.S. Steel Export Company, General Conditions of Sale-C.I.F. and C.&F. Sales (rev. Dec. i,

1949)." The phrase "net landed weights" is often used by traders to place some risks of deterioration of the

goods in transit upon the seller while shifting other risks to the buyer. Sometimes courts have interpretedthis and similar phrases as transforming the contract from a shipment to a destination contract. TheUniform Commercial Code regulates the matter in section 2-32X.

22 Cf. The Julia, supra note 5.

LAW AND CONTEMPORARY PROBLEMS

to the carrier "when no other place for delivery has been agreed upon" (articlei9). But nothing is said about how to determine whether another place for de-livery has been agreed upon, i.e., whether the contract is a destination contract.In fact that question can only be answered by analyzing how the parties haveallocated the various risks.

Thus the ULIS concept of risk is circular: risk passes upon delivery (in theULIS sense of handing over conforming goods for transmission to the buyer), butdelivery turns-partly, at least-on passage of risk. It surely turns on the parties'allocation of the risks of loss or deterioration of the goods; more realistically, itshould also turn on their allocation of other risks, such as transportation, insurance,credit, and government intervention.

The only reference in the ULIS to the effect of contractual clauses on the passingof risk is in article ioi, which states: "The passing of the risk is not necessarily de-termined by the provisions of the contract concerning expenses." This says nothing.The passing of the risk should not necessarily be determined by any single provisionof the contract.

Because the concept of risk in the ULIS appears to be merely a formal linkbetween delivery (deliurance) and the price-obligation, the law is left in a stateof confusion that may in many cases resist even the most careful drafting of con-tracts. 3

IV

THE LACK OF SPECIFICITY

It is, above all, the lack of specificity of the ULIS that will impose heavy burdenson drafters of international sales contracts and on courts and arbitral tribunals calledon to interpret such contracts. The failure to define more than a few of the basicconcepts of the ULIS and to state more fully the qualifications and exceptions to itsgeneral rules; the failure to deal with so-called trade terms (c.i.f., f.o.b., and so on)and with the special problems of sales performed by delivery of transportation, in-surance and banking documents; and the failure to relate delivery (delivrance)to risk in a more meaningful way, by spelling out the effect of various contractualallocations of risks upon the time and place of delivery (and hence upon the buyer'sobligation to pay the price)-all of these seem to this writer, at least, to be substantialdefects, even apart from the exclusion of rules of private international law thatmight help to remedy them.

But these are all defects that can be overcome. It is not necessary to tear downthe basic foundation and design of the ULIS in order to supply its missing super-

" Professor Honnold wrote of the 1956 draft of the ULIS: "Risk of loss presents the draftsmen of theUniform Law with their most significant and challenging opportunity for improvement." Honnold,supra note 1g, at 316. Unfortunately, the draftsmen did not seize the opportunity, but left the earlierprovisions on risk virtually unchanged.

A CRITICAL COMMENT

structure. Its reliance on international trade usage and on contract practices as theultimate source of international sales law is sound. Its harmonization of basicconcepts of international sales law is valuable. What is needed is, first, a recognitionthat just as the ULIS is subsidiary to usage and contract, so national law-applicableunder the rules of private international law-must be retained as subsidiary to theULIS; and second, an elaboration of the ULIS to include a great many more rulesdealing with those specific problems of international sales law that are not treateduniformly by national laws or by usage.24

The elimination of article 2, with its exclusion of private international law, wouldsolve a great many-though by no means all-of the problems that arise from theexcessive generality of the ULIS. National law would then be subsidiary to theULIS, filling in its gaps. It is true that many new problems would arise concerningthe relation between the provisions of the ULIS and those of the national law.25

Such problems would become especially acute when there is a clash of basic conceptsbetween the ULIS and the national law. It seems to this writer, however, that thebasic concepts of the ULIS are sufficiently universal to permit a satisfactory adjust-ment-ultimately, at least-between it and national legal systems viewed as sub-sidiary to it.

Assuming that the ULIS is amended to permit rules of private international lawto be applied without special contractual provisions therefor, the need for amplifica-tion, definition, and qualification of its general rules will nevertheless remain acute.Without more specificity, there will be very great uncertainty as to whether or notthere is a gap in the ULIS requiring the application of the national law. Thisuncertainty, particularly in the area of documentary sales, will infect the drafting ofcontracts as well as the interpretation of them in cases of dispute. What is mostneeded, then, is to expand the ULIS to cover particular types of documentary sales,and to fill many of its present rules (especially those on risk) with more detail--without, however, sacrificing the flexibility of its general concepts.

We have in the Sales Article of the Uniform Commercial Code one example ofhow sufficient detail can be achieved in the law of international sales while preservingthe flexibility of general concepts. We do not suggest that provisions simply beextracted from the Uniform Commercial Code and inserted in the ULIS; that wouldonly result in a hodge-podge. Moreover, the style and content of the Uniform Coin-

"' Professor Honnold suggests that the reason the drafters of the ULIS did not deal with some ofthe important problems that may arise in sales transactions was "because of the peculiar difficultiesanticipated in reaching international agreement." Honnold, supra note i9, at 311. If this is so, it is aregrettable abdication. In fact, it might well prove easier to reach international agreement on specificmatters of commercial importance-especially where the rules are subject to modification by the parties-than on general matters of basic doctrine.

" The relationships between state and federal law in the United States provide an interesting parallel.Concepts of state law may be used to give the federal law meaning, where the federal law is in generalterms, and in other cases the federal law may supplement state law. Cf. AarHUR T. voN MasmaN &DONALD T. TkAur-nAN, Tim LAw OF MULTISTATE PROBLEMS 1049-58 (1965).


mercial Code may be too "American" to be acceptable elsewhere. Yet as ProfessorClive Schmitthoff has said, "although the Uniform Commercial Code lacks elegance,it does answer the questions." It should be recalled that particularly in the SalesArticle of the Code, the influence of the writings of Ernst Rabel was strong-and itwas Rabel who gave leadership in the earlier drafts of the ULIS.

A revision of the ULIS by insertion of more specific provisions designed to recon-cile conflicting rules of various legal systems will also challenge certain of its basic con-cepts. It will call in question the heavy emphasis on communication and cooperationbetween buyer and seller when difficulties arise-an emphasis that is more appropriateto intranational and intra-European trade than to long-distance overseas transactions.The inclusion of provisions on various types of documentary sales may also requiresome amendments of basic rules of the ULIS in order to distinguish obligationsunder contracts for the sale of plant and machinery from obligations under contractsfor the sale of raw materials and agricultural commodities. The ULIS is intendedto be law for the whole world, governing the most diverse kinds of sales, amountingin value to over 135 billion dollars a year, between enterprises that are often situatedthousands of miles apart; of course, a high degree of generality is essential in sucha law if it is to satisfy the need for uniformity, but at the same time, unless it isrevised to make more elaborate distinctions between various types of transactions itmay become a bed of Procrustes, with all kinds of international sales cut or stretchedto a single size.

CoNCLUSION

Codification of the law of international sales must, if it is to be successful, growout of custom and belief-and, in particular, out of the common experience andshared concepts of the international trading community. This is recognized in theULIS by the overriding effect given to what is there called "usage." Usage super-sedes the ULIS itself, and contract, which also supersedes the ULIS, is to be inter-preted in the light of usage. But in the commercial field, at least, legislation must notonly reflect usage and refer to it, but must also develop and refine it. Otherwiselegislation is not needed; and in law, surely, what is not necessary to do is necessarynot to do.

We have entitled this essay a "constructive critique" because it is an effort toshow how the ULIS can be, and should be, revised to develop and refine internationaltrade usage. Since the time is not ripe to enact a comprehensive code embracingall aspects of such usage, opportunity to refer to the various national legal systems,which themselves incorporate international trade usage, must be provided. As thereis a pressing need for a greater degree of uniformity and certainty, however, a newset of rules is needed-not only to restate basic concepts but also, and above all, to

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resolve those particular differences and uncertainties in national legal systems thatare oppressive to international trade. Such an international codification must, ofcourse, be a subsidiary law-as the ULIS is-in the sense that its rules should operateonly when usage and contract are not decisive. But it must not sacrifice answersfor elegance. It must tell both those who draft international sales contracts andthose who enforce them what the rule is if the contract is silent or ambiguous.